The devil that basically hurt the U.S. economy is finding its way back. I’m not sure if it’s collusion or fear or just being sneaky but interest rates and loans are playing a symbiotic game that got us in trouble again, and I hope most people will have learned the lessons from the past so they don’t go there again.

Jeff Ferzoco via Compfight

What’s up? First, in many places interest rates are skyrocketing again. People without great credit scores are being hit with interest rates as high as 25% in trying to purchase things like cars, and some people across the country who have found a financial base again and are trying to purchase homes are encountering interest rates in the double digits.

The antidote being given is to offer floating, adjustable interest rates again, which is what brought the housing industry down in many states and led to record foreclosures. I have to admit that looks attractive right now at 3.25%, but only those with the best credit reports are getting that rate. For others, if they qualify at all, it’s going to be much higher, which means higher payments at the very least.

I get it; banks are scared, and they should be. I also get this, that banks had been denying many people loans out of fear of getting hammered by people defaulting on loans like they had been recently doing but then they realized that they weren’t bringing in any new business, credit card business was stalling, and they had to do something.

I also get the other side, consumers who had been in dire straits now having money again, even if it’s not as much as before, and still wanting and needing some of those large creature comforts. I mean, outside of New York City and maybe Los Angeles how many of us can easily get around without a car?

Something else that’s happening, moreso from used car dealers, is fudging numbers on loan applications so people can qualify for cars they shouldn’t be able to purchase. A recent New York Times story highlighted a guy who hadn’t worked since 1991 and was on Social Security who told the people at the dealership this but they put down on the application that he earned $35,000 a year and got the loan, only to have the vehicle repossessed a few months later when he couldn’t make the payments. The reality has always been that many people fudge their income numbers here and there, but to have someone else do it for the consumer… that’s scary.

Consumers need to be smart and take care of themselves because the banks, dealerships, etc, don’t care about them; they only care about making money. You need to get set rates for things you buy, and then you need to calculate whether you can afford the payments or not.

If not, find another alternative until you can afford it. Trust me, it’s better to have to take a bus to work and maybe pay a friend gas money to take you to the store once or twice a week than to go into debt, default on loans you can’t pay and, possibly, file for bankruptcy. And these days, if you’ve already filed, you could get charged with fraud; talk about scary.

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